Telstra shareholders face NBN vote

Telstra shareholders are about to vote to dismantle their company, almost certain to approve the $11 billion deal with the Federal Government to hand its fixed line business to the National Broadband Network.

Transcript

They're almost certain to approve their company's $11 billion deal with the Federal Government to hand its fixed-line business to the National Broadband Network.

Here's Phillip Lasker.

PHILLIP LASKER, REPORTER: There have been few certainties for Telstra's shareholders in recent years, but tomorrow's vote to cede its fixed wire business to the National Broadband Network is one.

MARK MCDONNELL, BBY TELECOMS ANALYST: Very much Hobson's choice, and that's regrettable in some ways because clearly there are other alternatives that shareholders could've been presented that didn't involve functional separation, a different form of structural separation.

STEPHEN MATTHEWS, SHAREHOLDERS ASSOC.: The Government has virtually held a gun at Telstra's head and said, "If you don't agree to this, we will restrict your ability to access the new 4G spectrum."

PHILLIP LASKER: But head of equities at Perpetual Matt Williams, who is one of Telstra's biggest shareholders, is well and truly on board.

MATT WILLIAMS, PERPETUAL INVESTMENTS: I've been watching the company for a long time. This is the clearest blue skies I can see ahead of the company that I've seen in a long time.

PHILLIP LASKER: Although analysts like Mark McDonnell see only grey clouds because the competition regulator, the ACCC, is yet to give the arrangement its blessing.

MARK MCDONNELL: Look, I've read every submission to the ACCC, and without exception they are all negative. They are all hostile to an ACCC approval of the Telstra undertaking.

PHILLIP LASKER: But both big and small shareholder representatives will be reassured by the right assurances from Telstra management.

STEPHEN MATTHEWS: One is that if the ACCC insists on any modifications to the agreement that cost in excess of say $100 to $200 million that Telstra will come back to shareholders and re-seek approval.

MARK MCDONNELL: But it's so politically contentious that far from providing the certainty that people are seeking, it's only going to be certain to the next election.

PHILLIP LASKER: Although others are looking beyond the politics and beyond a future where margins are under more pressure.

MATT WILLIAMS: We still think Telstra is coming off a $20 billion transformation project instigated by the previous management. This means that capex will probably run down a bit and that there's plenty of scope to pay that very - the ever-important 28 cent dividend.

PHILLIP LASKER: The shareholder anger might not come from the NBN proposal, but from the vote on directors' pay packets, with new accountability rules in place where a significant shareholder revolt against pay two years in a row could see a board spill. Telstra maintains executive pay and shareholder interests are aligned and it pays for performance.

STEPHEN MATTHEWS: That's a nonsense. Over the last five years, the CEO and the top five executives have been paid $180 million. The share price has tanked 35 per cent. The dividends don't even make up for that loss. So it's a win for the executives, $180 million, and it's negative for shareholders. It's in Alice in Wonderland stuff.

PHILLIP LASKER: Could the Mad Hatter's tea party be a blueprint for the Telstra board meeting?